Wednesday, September 23, 2009

FHFA Home Price Index

Missed this yesterday. Peter Boockvar (via The Big Picture) details (bold mine):

The July FHFA Home Price Index rose 0.3% month over month, 0.2% less than expected and June was revised lower to a gain of 0.1%, down from the initial report of up 0.5%. Year over year prices are down 4.2% and are (only) 10.5% below its April 2007 high. According to the FHFA, their index is back to the March ‘05 level.

This measure only includes those single family mortgages that are backed by Fannie Mae and Freddie Mac (i.e. conforming loans), but is well diversified geographically (includes all 50 states). The Case-Shiller HPI index in contrast includes jumbo loans and also doesn’t include data from 13 states. Its 20 city index is down 33% from the all time high. The Case-Shiller index is value-weighted, “meaning that price trends for more expensive homes have greater influence on estimated price changes than other homes.”

FHFA’s index “weights price trends equally for all properties.” Thus, take today’s info in conjunction with others to get a more complete picture on pricing trends.
Not surprising that the areas showing the strongest rebound are those areas that had already seen a significant correction to the downside (i.e. Pacific, South Atlantic, and Mountain were those areas with the largest year over declines).

Month over Month by Region


More broadly, prices within the FHFA index have appeared to stabilize...

Historical Index


But, the improvement we've seen in lower to middle-income homes backed by conforming loans doesn't mean all markets have improved. As Calculated Risk warned backed in June (bold mine):
The FHFA index is based on GSE (government sponsored entity) loans (i.e. Fannie Mae and Freddie Mac conforming loans), and as the most recent data showed, a higher percentage of the problem loans were non-GSE private label loans. Also, the FHFA misses many larger loans in general, and high end prices have held up better so far - but that will change when people realize there are few move-up buyers.
In other words, the problem areas had been concentrated within the lower-end subprime / Alt-A funded home purchases (not these homes within the FHFA index) and now the problems are drifting to higher-end homes which aren't getting the benefit of first time buyers (i.e. for high-end homes move up buyers can be throught of as the equivalent) and/or a tax credit.

We're not out of the woods just yet...

Source: FHFA